The Gannett Company said on Tuesday that it plans to spin off its print operations, including USA Today and the Free Press, becoming the latest media company to break itself up, The New York Times reports.
The separation follows in the footsteps of many other media companies – from Rupert Murdoch‘s empire to Time Warner to E.W. Scripps – that have spun off their print arms in recent years.
Such transactions are intended to free faster-growing television and other media operations from slower-growing newspaper and magazine businesses, pushing up stock prices while allowing each division focus on its own needs.
The TV company, which is unnamed, will also own Gannett’s digital operations, including CareerBuilder, the huge online job website. And Gannett will soon be adding all of Cars.com, having agreed to buy out its existing partners in the venture – including the McClatchy Company, Tribune and Graham Holdings – in a deal that values the auto sales site at about $2.5 billion.
The publishing business, which will keep the Gannett name, will own 81 daily newspapers and the British news company Newsquest. Its flagship title will remain USA Today, which the company has sought to build out into a digital news giant.
How to understand what Gannett is doing
The newsonomics of splitting up media companies, with Gannett maybe next
Ken Doctor, a leading industry analyst, writes:
"Investors have had a long love affair with the stock, at least compared to its newspaper company peers. But Gannett’s newspapers are a drag on its earnings. Its Q2 publishing results affirm that things aren’t getting much better — down 3.7 percent year-over-year in revenues overall, 5.1 percent in print ad revenues — and that fueled a little speculation that Gannett may be preparing to sell some of its 81 daily newspapers, a speculation fueled by CEO Gracia Martore’s reply to an analyst."
Another observer expects newspaper sales
Dave Elbert, a business columnist in Des Moines, writes:
Here’s one likely scenario: a bust-up of the newly created print-only division by selling off the properties. . . . The parent company, which has yet to be named, said it plans to retain Gannett’s broadcast and digital properties.
That is a crushing blow to the print operations, because it means that the digital properties, which are the only significantly profitable vestiges of what was once known as classified advertising, will no longer be available to the community newspapers.
The Gannett announcement said that CareerBuilder and Cars.com will be housed on the TV side of the split, removing them as profit centers from the print operations.
That shift, will make it even more difficult for the print operations, which are already suffering from losses of advertising and circulation revenue in recent years, to be profitable.
Without the digital properties, the future of print-only operations become much darker.
The most likely scenario for maximizing shareholder value on the print side will be to sell the newspapers. And since no investor in his or her right mind would buy all 81 Gannett newspapers, the best option becomes selling the newspapers to possible buyers in each of their home communities.
